Currency speculators cut their bets in favor of the U.S. dollar to the lowest net long in seven months in the latest week, according to data from the Commodity Futures Trading Commission released on Friday.
The dollar dropped broadly on Friday, hitting a seven and-a-half month low against the safe-haven Swiss franc, dented by the prospect of a U.S. government shutdown and a lack of clarity over when the Federal Reserve will scale back stimulus.
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"The dollar is playing a huge roll," said Sean Hyman, Editor of Moneynews at Ultimate Wealth Report. "It's been dropping since last July and appears to have broken its two-year uptrend line. If that continues, that alone will be very supportive of gold and silver heading higher."
Hyman added: "I believe gold heads to $1,500-$1,575 next. Could it pullback more first? Sure, but I think that's where gold ultimately goes next."
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Sentiment is almost evenly split this week although the overall tone is leaning towards those with a negative price bias but only marginally.
Exactly half of the respondents in CNBC's poll of gold market sentiment (eight out of 16) believe prices will fall this week while 44 percent (seven out of 16) expect gains. One respondent expects prices to trade around current levels.
Last week's CNBC gold sentiment correctly predicted prices would climb. Latest data from IG Markets shows 77 percent of more than 501 clients with open positions in gold expect prices to climb while the remaining 23 percent are betting on price falls.
Gold for December delivery settled up $15.10, or 1.1 percent, to $1,339.20 an ounce on the Comex division of the New York Mercantile Exchange, helping bullion record a modest 0.5 percent gain for the week.
- By CNBC's Sri Jegarajah. Follow him on Twitter